EU executive plans to promote crowdfunding sector

File picture shows European Union member states' flags flying in front of the building of the European Parliament in Strasbourg

European Union member states’ flags flying in front of the building of the European Parliament in Strasbourg – REUTERS/Vincent Kessler/File

HUW JONES | LONDON | Mar 21, 2014 – (Reuters) – A European Union “quality label” and possible state aid for crowdfunding would help the 1 billion euro (848.8 million pounds) sector grow to fund economic growth, the bloc’s executive body said in a document seen by Reuters.

Crowdfunding allows individuals and small businesses to raise money from pools of investors who can put money into peer-to-peer lending schemes or securities such as unlisted shares.

It is often hosted on online platforms such as Crowdcube, Funding Circle and Kickstarter.

The European Commission, in a draft document to be published next week, said crowdfunding has real potential to finance certain types of projects.

“Crowdfunding is an important source of finance to some half a million European projects each year that otherwise may not obtain the necessary funds to be realised,” the document said.

The document will be published alongside a blueprint setting out ways of boosting market-based fundraising at a time when small companies find it harder to get loans from banks that are focusing on increasing regulatory capital buffers.

“It’s great to see the EU recognise the positive impact that peer-to-peer lending has had across Europe,” said James Meekings, co-founder of Funding Circle.

The EU executive will conduct two studies this year; the first into how crowdfunding is used, the second into its potential for funding research and innovation, the document said.

The commission has just adopted new “risk finance” rules to govern state aid for small companies that find it hard to get loans in their early stages.

The document says these rules could also cover certain types of crowdfunding platforms.

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Press Release